Huntsman settles with banks for $1.7 billion

Huntsman Corp. on Tuesday reached a surprising settlement with two banks it had sued in relation to failed acquisition deals with Dutch chemical maker Basell and Hexion Specialty Chemicals Inc. of Columbus.

The settlement with Credit Suisse and Deutsche Bank is worth about $1.73 billion in cash, debt financing and other costs. The case involving The Woodlands, Texas-based company went to trial last week in Texas state court, with Huntsman seeking $4.6 billion in damages.

Under the terms of the agreement, the banks were to give $620 million in cash to Huntsman (NYSE: HUN), along with $500 million senior secured term loan financing, $600 million in unsecured note financing, and $12 million for reimbursement of litigation fees.

The deal follows a $1 billion settlement with Hexion and its parent company, Apollo Management LP, in December 2008. Private equity firm Apollo had led a proposed deal for Hexion to acquire Huntsman, but that transaction fell apart in 2008 when the banks backed away from the deal. Huntsman in 2007 had been in talks to be acquired by Basell but walked from the deal in favor of a higher offer from Hexion.

Huntsman said the proceeds will be used to repay debt and reduce the size of the company’s revolving credit facility.

“The cash and financing will enhance our already enviable cash position to more than approximately $1.7 billion and provide us much greater flexibility as we manage our business,” CEO Peter Huntsman said in a statement.